NJ WARN Act Creates Risk for Closures and Mass Layoffs

March 15, 2020Alerts

The sudden and massive business disruptions caused by the coronavirus pandemic may force some companies to face the difficult decisions of whether to lay off employees or even shut down.

In New Jersey, those hard choices are made even harder because the state’s version of the federal Worker Adjustment and Retraining Notification Act creates certain obstacles and risks that must be taken into consideration.

This is particularly significant because the NJ WARN Act (also known as the Millville Dallas Airmotive Plant Job Loss Notification Act) was recently amended, effective July 19, 2020, to mandate severance and impose new penalties for failing to comply. While the amendments are not currently in effect, employers should still consider whether the decisions they are making now will be impacted by the amendments when they do take effect.

Overview of Current NJ WARN Act

Currently, the NJ WARN Act, like the federal WARN Act, applies to employers with 100 or more full-time employees and requires 60 days’ notice for:

  • a “mass layoff” that results in an employment loss at an establishment during any 30-day period for 500 or more full-time employees, or for 50 or more full-time employees representing one-third or more of the full-time employees at the establishment;
  • transfer of operations, defined as the permanent or temporary transfer of a single establishment, or one or more facilities or operating units within a single establishment, to another location, inside or outside of this State; or
  • the termination of operations, which is the temporary or permanent shutdown of a workplace if the shutdown results in an employment loss for 50 or more full-time employees.

Notice must be provided to each terminated employee and bargaining unit, the chief elected official of the municipality, and the Commissioner of Labor and Workforce Development.

Relevant Exceptions

Importantly, unlike the federal WARN Act, the NJ WARN Act does not contain a “faltering business” exception or an exception for “unforeseen business circumstances,” both of which may be relevant in responding to the coronavirus. Instead, the NJ WARN Act, merely provides an exception if a layoff was expected to be for six months or less, but is extended beyond six months due to business circumstances that are not reasonably foreseeable. In that case, notice is required at the time it becomes reasonably foreseeable that the extension beyond six months will be required.

For business that close as a result of the coronavirus, the NJ WARN Act does contain an exception for the termination of operations resulting from a national emergency. In the case of coronavirus, since a national emergency was declared, this exception should apply. Notably, this exception does not apply in the case of a layoff.

The Amended NJ WARN Act – Effective July 19, 2020

If a business is considering laying off employees, it is important to understand the new amendments that will go into effect in July. As amended, the law will require 90 days’ notice and redefines “mass layoff” to mean the termination of at least 50 full- or part-time employees at or reporting to any establishment or group of establishments within the state, rather than just a single establishment. It also eliminates the one-third requirement.

Critically, the amendments will mandate severance to affected employees, even if the required notice is provided. All terminated employees are entitled to one week of severance for every year of employment. If the statutory notice of 90 days is not provided, then the employer must pay an additional four weeks of severance on top of the one week per year of service. For businesses that are already struggling, or forced to lay off employees the financial impact of the new law is daunting.

Because the amendment applies to full- and part-time employees, many employers that are not currently covered, may become covered in July. Companies that are still considering their options and holding off on layoffs need to determine whether their status will change under the amendments and plan accordingly.

Similarly, if an employer decides to temporarily lay off employees, there could be significant financial liability if that layoff becomes permanent after the amendments take effect due to the severance requirement

The main takeaway is that the decision of whether to make the layoff permanent should be made prior to the amendments going into effect.

The choice to shut down operations or lay off employees is not easy, especially in response to a national crisis like the coronavirus pandemic. But if an employer must make that decision, it should do so with the full understanding of its legal obligations. Employers should consult with counsel to determine if the NJ WARN Act or other employment laws apply.

For more information about this alert, please contact Jonathan D. Ash at 609.895.7079 [email protected], or any member of the firm’s national Labor & Employment Department.